Who’s Your Daddy?

Gus Wenner runs Rollingstone.com; his father gave him the job. But Jann Wenner, the magazine’s co-founder and publisher, was quick to assure critics of the appointment process that his son is terribly talented and had to prove himself before being given the reins. Apparently Gus worked his way up from more junior positions with the company, and demonstrated, according to his father, the “drive and discipline and charm, and all the things that show leadership.” Gus Wenner is 22 years old.

He is certainly not the only kid just out of college, or even out of high school, working at daddy’s firm. Family contacts are a common way of finding both temporary internships and longtime careers. But whether because of blatant nepotism, or a privileged head start in life that nurtures talent and ambition, opportunities for the children of the top 1 percent are not the same as they are for the 99 percent.

Photo

Credit Javier Jaén

This is hardly a shock, but it is precisely the type of inequality that reveals the elusive promise of the “Just Do It” version of the American dream and deepens our cynicism about how people get ahead. As a consequence, it dilutes support for public policies that could address the lack of upward mobility among children born at the bottom, who ought to be given priority.

A strong tie between adult outcomes and family background rubs Americans the wrong way. When the Pew Charitable Trusts conducted a nationally representative poll asking about the meaning of “the American dream,” some typical answers included: “Being free to say or do what you want” and “Being free to accomplish almost anything you want with hard work;” but also “Being able to succeed regardless of the economic circumstances in which you were born.”

This is exactly the reason that “the American dream” is not only a defining metaphor for the country, but also why Americans have long been willing to tolerate a good deal more economic inequality than citizens of many other rich countries. A belief in the possibility of upward mobility not only morally justifies inequality as the expression of talents and energies, but also extends a promise to those with lower incomes. After all, why would you be a strong advocate for reducing inequality if you believe that you, or eventually your children, were likely to climb the income ladder?

Hard work and perseverance will always be ingredients for success, but higher inequality has sharply tilted the landscape and made having successful parents, if not essential, certainly a central part of the recipe.

American children raised at the top, and at the bottom, are more likely to land on the same rung of the income ladder as their fathers than their Canadian counterparts. More than one-quarter of sons raised by fathers in the top 10 percent stay in the top 10 percent as adults, and another quarter fall no further than the top third. Meanwhile, half of those raised by fathers in the bottom 10 percent remain at the bottom or rise no further than the bottom third. In Canada there is less stickiness at the top, and children raised in the bottom are more likely to rise to the top half in earnings.

Maternal income was left out of this study and others like it because many women were out of the workforce in past generations. This may have made sense once, but no longer. The achievements of the next generations reaching adulthood will reflect the steep rise in the number of working mothers as well as the increasing tendency of high earners to marry each other. Both these trends have raised family incomes in a way that will reinforce privilege and position.

BUT American parents with high aspirations for their children are not packing their bags for Denmark, or even crossing the Canadian border, particularly if they find any appeal in Jann Wenner’s belief in the virtues of talent and energy.

Children, after all, inherit a good deal from their parents: height, beauty, personality, to saying nothing of drive, discipline and perhaps even charm. It should be no surprise that a parent’s and a child’s incomes are correlated if certain genetic traits or aspects of family culture continue to be as important for success now as they were a generation ago. The relatively small and homogeneous Danish population can hardly be compared to a large and ethnically diverse country like America: perhaps there are just fewer visionary and driven entrepreneurs on the coasts of the North Sea who have equally talented children?

The belief that talent is bred in the bone, and that opportunities are open to anyone with ambition and energy, also has a dangerous corollary. When the lens of public policy is focused on the plight of the poor, this belief can help revive the laissez-faire conception of the poor as “undeserving,” the authors of their own predicament. Yet we actually know a good deal about why children of the poor have a higher chance of being stuck in poverty as adults.

The recipes for breaking this intergenerational trap are clear: a nurturing environment in the early years combined with accessible and high-quality health care and education promote the capacities of young children, heighten the development of their skills as they grow older, and ultimately raise their chances of upward mobility.

Talent is nurtured and developed, and even genes are expressed differently depending upon environmental influences.

It is not just demography and inbred entrepreneurial spirit that make the tie between parent and child incomes stronger in America than any other rich country to which it is commonly compared. Differences in public policies also play a role. Less inequality makes opportunity-enhancing policies that are of relatively larger benefit to lower-income families easier to introduce and sustain. Ontario, the most populous Canadian province, is introducing full-day kindergarten, accessible to all 4- and 5-year-olds, without fanfare or a hint of the kind of rhetorical rancor and calamitous opposition that the Obama administration has faced for its proposal to do the same.

THE Danish and Canadian top 1 percent certainly have their share of privilege: the Gus Wenners of the world, talented or not, are not rare. A recent study published by the Russell Sage Foundation showed that about 30 percent of young Danes and 40 percent of Canadians had worked with a firm that at some point also employed their fathers. This is more likely the higher the father’s place on the income ladder, rising distinctly and sharply for top earners. In Denmark more than half of sons born to the top 1 percent of fathers had worked for an employer for whom the father also worked, and in Canada the proportion is even higher at nearly 7 of every 10.

This is on a par with the United States, where, according to a 2006 study, up to half of jobs are found through families, friends or acquaintances, with higher wages being paid to those who found jobs through “prior generation male relatives” who actually knew the potential employer or served as a reference.

The difference is that Danes, Swedes and even Canadians are able to promote mobility for the majority while continuing to live with a dynasty at the top. It is the lack of a cleareyed focus on the top, free from rhetoric about talent and the pursuit of dreams, that is keeping Americans from effectively promoting upward mobility.

This intergenerational transmission of employers has little to do with the exceptional talent that produces the next Steve Jobs. There is more than a one-in-three chance that newly appointed C.E.O.’s of American family firms will have a family connection. Yet these firms are more likely to experience a subsequent decline in performance than those promoting from outside.

Family members do not on average have a distinctly more valuable set of skills or managerial talent, but the belief that they do remains an important thread running through the American dream and sustains the aspirations of Americans in, roughly speaking, the top fifth of the income distribution.

The 1 percent are an important touchstone for these upper-middle-class families, who after all have also experienced significant growth in their relative standing. The graduate and other higher degrees that they hold, and for which they exerted considerable effort, have put them on the upside of the wave of globalization and technical change that has transformed the American job market.

An era of higher inequality gives them both more resources to promote the capacities of their children, and more incentive to make these investments since their children now have all the more to gain. It is not unreasonable for these aspiring families to believe that with a little more effort they may yet cross the threshold into the top 1 percent, and they can certainly imagine that their children stand just as good a chance, if not better.

For them, an American dream based on effort, talent and just deserts still lives, and as a result they are likely to be less and less predisposed, with their considerable cultural and political influence, to support the recasting of American public policy to meet its most pressing need: the prospects of those at the bottom.

What's Next

The Great Divide is a series on inequality — the haves, the have-nots and everyone in between — in the United States and around the world, and its implications for economics, politics, society and culture. The series moderator is Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank.